On July 18, 2013, Detroit filed for bankruptcy, the largest municipality in U.S. history to do so.

Initially bankruptcy, both public and private, was considered unconstitutional. When Congress first passed bankruptcy legislation in 1934, the Supreme Court immediately objected.

Article I, section 10, clause 1 of the Constitution reads, in part, "No State shall pass any Law impairing the Obligation of Contracts." The high court recognized debt as a contract and the bankruptcy legislation as an impairment of contracts.

The Court also found that the federal government did not have the right to pass these bankruptcy laws. They violated the Tenth Amendment, which states that powers not explicitly granted to Congress are reserved to the states.

This interpretation of the Constitution was upheld for five years. However, in 1939, bankruptcy legislation was approved. President Franklin D. Roosevelt achieved his agenda by threatening to stack the Court with liberal appointees.

Today, municipalities are allowed to declare bankruptcy under Chapter 9 of the legislation, canceling contracts and reneging on their obligations in order to restructure their finances.

But municipalities can only file for bankruptcy with approval from the governor. They also can't be forced to liquidate their assets. Only the city or the emergency manager can make that decision. Some people fear that the Detroit Zoo or the Detroit Institute of Arts will close, but such actions are highly unlikely.

Corporations go bankrupt for a wide variety of reasons. The business may have been selling a product no one wants, lose to superior competition or fail because of poor financial management.

However, a government doesn't have competition or sell a product. The only reason it could go bankrupt would be poor financial management.

That's why it is so remarkable that many commentators have blamed Detroit's bankruptcy on anything but its financial management. For example, Paul Krugman, a liberal economist and New York Times columnist, had the audacity to write, "There are influential people out there who would like you to believe that Detroit’s demise is fundamentally a tale of fiscal irresponsibility and/or greedy public employees. It isn’t. For the most part, it’s just one of those things that happens now and then in an ever-changing economy."

Economists often claim that corporate bankruptcy "happens now and then." With an ever-changing public demand and competition, they are saying in effect that it is natural for a buggy whip company to go bankrupt or out of business with the rise of the automobile.

Without the destruction of certain industries, an economy can't evolve from agrarian to manufacturing or from manufacturing to information technology. The natural demise of some companies or industries is how markets evolve.

But none of this is true of city government. There is no natural market evolution away from government. There is no automobile company which makes government obsolete. The only reason a government can go bankrupt is from mismanagement and mismanagement doesn’t just "happen now and then."

Many liberals are not acknowledging that Detroit's demise was simply a failure to manage cash flow. Responsible public administration requires living within a city's means. And good management is judged by scaling to keep the burden of taxation low in proportion to the underlying economy.